1. A GLOBAL ECONOMY Providing Financial Support to the Third World Janina Kearns November 22, 1999

2. Topics Of Presentation §Introduction: A View of World Poverty §A Global Response: The History of the World Bank §An American Response §Jubilee 2000: The Hope of a New Millennium §Questions?

3. Who’s Who? §First World: Western capitalist nations, Japan, Australia, and New Zealand §Second World: Socialist countries of Europe and Middle East §Third World: Africa, Latin America, (most of) Asia

4. Poverty In Our World §The richest 225 people in the world have a combined wealth of over $1 trillion; this is equal to the total annual income of the poorest 47% of the world. §More than 1.3 billion people live on less than $1 per day §The richest 20% of the world consumes 86% of world’s goods and services; the poorest 20% consumes 1.3%. §One percent of the world’s population has a college education.

5. A Comparison

6. Global Income: 1960-1998

7. Why The Disparity? §Many of the Third World nations are former colonies that have gained their independence over the past century. §Walter Rostow’s five-stage model of economic growth: l Agricultural economy; feudalistic society l Availability of a natural resource; strong central government l Emergence of an industrial sector l Majority of the workforce shifts from farming to services and manufacturing l All economic sectors use modern technology

8. The World Bank §Originally called the International Bank for Reconstruction and Development (IBRD), it was instituted following World War II. §There have been 8 presidents (all American); James D. Wolfensohn was re-elected this year. §Currently, there are 155 member countries. §Voting power is dependent upon the weight of each country’s share.

9. World Bank (cont’d) §Late 1940’s - 50’s: Aid to war damaged countries; very little focus on developing nations. §1960’s: Attention shift to poverty in Third World; large- scale projects such as power plants, dams, roads, and railways. §1970’s: Oil crisis set many import-dependent countries back; many poor nations were forced to borrow money to meet the rising costs. §1980’s: Debt crisis lead to more heavy assistance. §Today: Structural Adjustment Programs (SAPs) provide guidance and resources to build sound economies on an individual basis.

10. US Foreign Aid §Marshall Plan: For a short period of time, the US was independent of the IMF and IBRD. §Highest shareholder of the World Bank. §Has provided $321 billion in assistance since World War II. §Do we give enough?

11. The United States spends less of its national wealth on helping the poor overseas than any of the other industrialized nations.

13. US Foreign Aid (cont’d) §Most American foreign aid is in the form of either food or money. §The long-term effects of aid on the recipient country: l Food aid dramatically affects local farming l Monetary aid: the trickle down theory is not always successful §The long-term effects of aid on the donor country: l Perpetuating the dependence of other countries on the US l Drains US resources

14. Is There A Solution? §Learning a lesson from Asia l In the early 1990’s an Asia SAP encouraged impoverished Pacific Basin countries (Hong Kong, Singapore, etc.) to minimize their imports and maximize their exports. §Free trade: cooperation by the wealthy countries l By lowering tariffs, industrialized nations are opening the door for poorer nations to have an equal opportunity in the strongest global markets. l Equal participation in markets leads to less dependence. l Increased influx of goods and services in the US economy.

15. Jubilee 2000: Debt Relief §Third World nations owe $6.8 billion in arrears to the US. §The average debt owed by the heavily indebted countries between 1983-85 was $122 billion; the average debt increased to $221 billion between 1993-95. §In Guyana, the average annual income is $829, while the accumulated foreign debt calculated per person is $2,278. §The Mozambique government spends four times as much money on debt payments than on health care. §Clinton is encouraging other First World leaders to join in this campaign. §The US contribution would be less than $1 for every American.

16. QUESTIONS?